Oil price slides as hedge funds’ buying fades; As investor optimism nears 2-year highs, analysts warn of stock-market pullback

Jan 14, 2020

Lead Stories

Oil price slides as hedge funds’ buying fades
John Kemp – Reuters
Despite the increase in tensions across the Middle East after the killing of an Iranian general by a U.S. air strike, hedge fund managers added only modestly to their bullish position in petroleum last week.
Hedge funds have gambled heavily on an oil price recovery this year, pricing in accelerating global growth, restrictive output policy by Saudi Arabia and continued tension short of war between the United States and Iran.

As investor optimism nears 2-year highs, analysts warn of stock-market pullback
Chris Matthews – MarketWatch
The 2020 bull market has picked up right where 2019 left off: with steady gains and another round of records. The S&P 500 index SPX, +0.15% has risen 1.8% year-to-date and the Dow Jones Industrial Average DJIA, +0.48% has gained about 1.3%, while the Nasdaq Composite Index COMP, +0.19% has advanced 3.4% so far this year, and each benchmark has set multiple record closes. But these gains could be evidence of exuberance in the stock market that is setting investors up for a pullback, analysts say.

CME Sees 54 Options on Bitcoin Futures Traded in Debut
Vildana Hajric – Bloomberg
CME Group Inc. traded 54 options on Bitcoin futures during the debut session for the contracts. The options provide the right, but not the obligation, to buy or sell a specified amount of coins within a set time period. CME Group was among the first U.S. regulated exchanges to offer Bitcoin futures in 2018. “The launch of listed options on futures is a significant step in the direction of increasing exposure to Bitcoin,” said Mike McGlone, an analyst with Bloomberg Intelligence. “Options are only launched and tradable on a liquid underlying and the trend in BTC futures on the CME is increasing volume and open interest.”

Options Trading for the Next Decade: TABB Group Survey
Russell Rhoads – TABB Forum
Electronification continues to transform the options market. To better understand the trends and drivers reshaping the market, TABB Group again is conducting its annual survey of buy-side market participants regarding their views of options and options trading.


2 Options Strategies to Ride Red-Hot Tesla Stock Higher
Steven M. Sears – Barron’s
It’s hard to ignore Tesla’s stock performance. Shares are already up 28% so far this year, and barely a day passes without them exhibiting locomotive powers.
Tesla (ticker: TSLA) recently delivered electric cars that were made in its Shanghai factory. The news drove the stock sharply higher, and the momentum has not left the stock, although it’s a good bet the short sellers have.

Oil prices expected to stay around $65-70 through 2024: Kemp
John Kemp – Reuters
Long-term expectations about oil prices remain firmly anchored around $65-70 per barrel, according to the latest annual survey of energy professionals conducted by Reuters.
Plentiful supplies from U.S. shale plays and other sources outside the Organization of the Petroleum Exporting Countries are expected to keep prices close to their recent range for the indefinite future.

Opinion: Bullish stock market investors will soon be their own worst enemy
Simon Maierhofer – MarketWatch
U.S. stocks have extended the fourth quarter’s gains this year, and investors expect the party to continue. Ironically, this kind enthusiasm is the stock market’s biggest enemy. How so? The math and crowd psychology behind any supply-and-demand-driven market can be boiled down to this simple chain of events: • Rising prices make investors overly optimistic. • Buyers convert into owners (owners can only sell, not buy). • Fewer buyers are left to bid up prices. • Sellers will eventually outnumber buyers. • Prices decline. I discussed the exact inverse (excessive pessimism) of that chain reaction in October 2018: “Today’s stock market pessimism is a reliable sign of a pending rebound.”


Core Concepts of Options
OIC is starting off the new year with a session for investors who are new to options, as well as those who want a recap of the fundamentals. For our Jan. 15 webinar, Core Concepts of Options, we’ll discuss: Stock trading vs. options trading The flexibility of options Option types Rights and obligations Standard contract terms Sign up now for this free session. Plus, registration means you can access the replay any time after the event!


Fundamentals simply do not matter in China’s stock markets
Michael Pettis – Financial Times
It is tempting to try to find meaning in the so-called “A-share premium”. This is the persistent valuation gap between the shares of Chinese companies that trade in Shanghai or Shenzhen (known as A-shares) and the shares of the same companies that trade in Hong Kong (H shares).

FX Resumes Its Growth with a Vengeance: 2019 Year-End Review of Currency Markets
George Bollenbacher – TABB Forum
Global foreign exchange trading growth is back on track. After an uncharacteristic dip in the Bank for International Settlements’ 2016 currency market study, overall daily volumes resumed their upward trend, exceeding US$6.5 trillion. TABB Group head of fixed income research George Bollenbacher analyzes the preliminary results from the 2019 BIS study.

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